Soft and hard aspects of green behaviour: A firm-level study of the pollution haven hypothesis in the Mediterranean Basin

Abstract

The paper tests the pollution haven hypothesis in the context of three economies on the borders of the European Union in the Mediterranean Basin: Greece, Italy, and Turkey. Large differences in soft and hard aspects of green behaviour are revealed. Multinational firms are found to be more likely to use ‘soft talk’ strategies across the three economies. Yet the research also reveals that the multinationals are often more energy-intensive. Data for electricity consumption (where the largest regulatory differences exist across the EU border) show that there is a difference in the energy intensity of foreign and domestic firms in Turkey. At prices 45% lower than the unweighted EU average, the paper documents a 114% difference in electricity consumption by ownership. This difference in the difference between foreign and domestic firms' green behaviour across the three economies studied provides strong validation for the pollution haven hypothesis.